Stocks climb, Treasuries retreat as Fed plans to buy mortgages

A Labor Department report released today before the Fed’s statement showed jobless claims increased 15,000 in the week ended Sept. 8, the biggest gain in almost two months, to 382,000. The median forecast of 50 economists surveyed by Bloomberg called for 370,000 claims. Tropical Storm Isaac resulted in about 9,000 applications for benefits, the agency said.

“We’re not sure what the economic effects of this program will be,” Dan Greenhaus, chief global strategist at BTIG LLC in New York, wrote in a note to clients. “It should help growth and employment on the margin -- but of all the announcements the Fed could have made today, this is very nearly one of the most accommodative that could have been reasonably expected.”

Dollar Weakens

The dollar weakened against 11 of 16 major currencies, with the euro increasing 0.3 percent to a four-month high of $1.2938. The dollar pared losses after dropping as much as 0.9 percent to 77.13 yen, the lowest since February. The franc weakened 0.4 percent against the euro as it fell against 12 of 16 major peers. The Swiss central bank vowed to keep defending the franc by buying foreign currencies in “unlimited quantities.”

European markets closed before the Fed’s statement. The Stoxx Europe 600 Index lost 0.2 percent, retreating from its highest level since July 2011, as European Aeronautic, Defence & Space Co. and BAE Systems Plc slid at least 7.9 percent after announcing plans to merge.

Barclays Plc said that shareholders of EADS and BAE may adjust their positions following yesterday’s announcement of a combination. EADS, the parent of Airbus SAS, would control 60 percent of the new entity, with London-based BAE owning the rest, the companies said yesterday.

Next Plc slumped 7.2 percent, its biggest decline in more than two years, as the U.K.’s second-largest retailer said that trading in August and early September was “unusually quiet.” A gauge of lenders contributed the most to the Stoxx 600’s slide.

‘Daft’ Move

The European Central Bank’s pledge to buy government bonds may mean that “in the end, action is not needed,” Governing Council member Panicos Demetriades said in Nicosia. German Finance Minister Wolfgang Schaeuble discouraged Spain from seeking a full international bailout, saying another request for aid risked a fresh round of financial-market turmoil.

“I’m not in the camp that says ‘take the money,’” Schaeuble said in an interview in Berlin today, when asked about French moves to press Spanish Prime Minister Mariano Rajoy’s government to ask for more aid. Spain “would be daft” to ask for a bailout on top of the 100 billion euros ($129 billion) for its banks if it didn’t need it.

In Australia, Fortescue Metals Group Ltd., the country’s third-biggest iron ore producer, dropped 14 percent as the Australian Financial Review reported it sought a debt covenant waiver from its lenders for the next 12 months.

The MSCI Emerging Markets Index increased 0.4 percent, rising for a sixth straight day in its longest rally of the year. The Shanghai Composite Index dropped 0.8 percent after the official Xinhua News Agency said massive stimulus measures would be “detrimental” to sustainable growth and as China’s central bank issued 28-day reverse-repurchase contracts for the first time in a decade, damping speculation reserve requirements will be cut.